Confusion with the Scope of the Red Flags Rule
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Financial institutions faced a mandatory deadline of November 1, 2008, to comply with the Red Flags Rule, section 114 and 315 of the Fair and Accurate Credit Transactions (FACT) Act. However, due to widespread confusion over coverage under the act, specifically whether the term "creditor" applies to particular businesses, the FTC postponed the deadline for compliance with Section 315 to May 1, 2009. |
According to a Business Alert issued by the Federal Trade Commission in June 2008, the Red Flags Rule apply to a very broad list of businesses including "financial institutions" and "creditors" with "covered accounts". A "creditor" is defined to include "lenders such as banks, finance companies, automobile dealers, mortgage brokers, utility companies and telecommunications companies". However, this is not an all-inclusive list.
The regulations apply to all businesses that have "covered accounts". A "covered account" includes any account for which there is a foreseeable risk of identity theft. For example, credit cards, monthly billed accounts like utility bills or cell phone bills, social security numbers, drivers license numbers, medical insurance accounts, and many others. This significantly expands the definition to include all companies, regardless of size that maintain, or otherwise possess, consumer information for a business purpose. Because of the broad definitions in these regulations, few businesses will be able to escape these requirements.
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Protection and Restoration of Identity Theft Victim Credit History
Summary of Rights of Identity Theft Victims
Provisions in this title require that the Federal Trade Commission, in consultation with the Federal banking agencies and the National Credit Union Agency, "prepare a model summary of the rights of consumers ... with respect to the procedures for remedying the effects of fraud or identity theft...". Beginning sixty days after the summary of these rights were established, all reporting agencies are required to provide a copy of this summary to any consumer that contacts an agency and states that he believes he has been a victim of fraud or identity theft.
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